Small-cap biotechs have been dominating the list of best-performing stocks ever since 2012. The underlying reason is that we've seen an incredible amount of game-changing innovation coming out of this group as a whole, leading to lucrative partnerships and/or takeovers by their big-pharma peers.  

With literally hundreds of publicly traded small-cap biotechs in the game now, however, it can be a tremendously daunting task to try to suss out the next big mover. That said, I think Geron Corp. (NASDAQ:GERN) is one name to keep a particularly close eye on moving forward. Here's why.

Geron might finally be on the cusp of a massive move upward
Geron is an odd little company in that it's been around for almost 25 years but has yet to produce a single approved product. Its lengthy history is pockmarked by dramatic shifts in the focus of its clinical program and multiple upheavals in management.

For investors, this has been a truly deadly combination, as Geron has survived almost exclusively by diluting its shareholder base, causing its share price to slump in a big way:

GERN Chart

In 2012, CEO John Scarlett announced another major restructuring effort in an attempt to reverse this trend, and his plan appears to be bearing fruit. The basic idea was to slash costs and refocus the company's remaining resources on its flagship telomerase inhibitor imetelstat as a broad-based treatment for a range of blood disorders. 

There have been some hiccups along the way, such as a partial clinical hold on imetelstat. However, a proof-of-concept study in essential thrombocytopenia, or ET, and a pilot study in myelofibrosis, or MF, proved to be enough to garner interest in the form of a licensing agreement from Janssen Biotech, a subsidiary of Johnson & Johnson (NYSE:JNJ).

What's really exciting about these early studies of imetelstat in hematological malignancies is that some MF patients experienced complete responses that were durable over long periods of time. By contrast, the only drug currently approved by the FDA for MF, Incyte and Novartis' Jakafi, has never produced a complete remission in this indication.

So after some high-profile failures in solid tumors, imetelstat looks like it may have found a promising niche as a treatment for blood-based cancers. And given that this market is already valued in the tens of billions, imetelstat would have to capture only a tiny slice for this drug to be a huge success for Geron and Janssen.

What's next?
Janssen is in the midst of launching a midstage trial for imetelstat in MF right now and plans on initiating another midstage trial for myelodysplastic syndromes, or MDS, by the end of 2015. If all goes according to plan, the top-line data readout for MF should hit the Street sometime in the first quarter of 2016, followed by the top-line data release for MDS in late 2016. These two planned trials are going to determine whether Janssen decides to continue, and subsequently expand, the collaboration into other blood-based disorders such as acute myeloid leukemia. 

As with any clinical-stage biotech, it's important to keep the company's cash-burn rate at the forefront of your mind. The good news is that Geron has dramatically lowered its operating costs by reducing its workforce and sharing the development costs of imetelstat with Janssen. So the company's $160 million or so in cash should be more than enough to get it through these key clinical timelines without having to dilute shareholders. 

The downside risk is thus confined to imetelstat's clinical results. And I like that bet because it's highly unlikely that these complete responses observed in a pilot study for MF were random, meaning that there's good reason to believe that similar results will be achieved in a larger study. In fact, J&J is already listing imetelstat as one of its key future products, with an anticipated regulatory filing date of 2017:

Source: Johnson & Johnson

In case you missed it, J&J is predicting that imetelstat, based on this stated timeline, will be able to forgo a late-stage and gain a regulatory approval for MF in the second-line setting on an accelerated basis. That's a major show of confidence for an extremely early-stage experimental drug, but it also reflects the dire need for new therapeutic options for patients with relapsed or refractory MF.

All told, Geron offers investors a compelling risk-to-reward ratio given the impressive early clinical results of imetelstat in MF and its extensive collaboration with Janssen that substantially lowers the risk of further dilution. Personally, I think this stock is certainly worth a deeper look by risk-tolerant investors.